Lending Criteria Guidelines - Ecology Building Society · 2020. 7. 1. · • Income paid must be...

Lending Criteria Guidelines

Building a greener society

INTERMEDIARY USE ONLY Updated December 2018

Introducer feesIntroducer fees on new residential mortgage business

will be paid at a rate of 0.40% of the mortgage value

(minimum £300; maximum £2,000). The fee will be paid

on completion of the mortgage.

The Society lends on properties in England, Wales,

Scotland and Northern Ireland. Lending cannot be

considered in Channel Islands or Isle of Man.

We are a provider of specialist mortgages for:

Renovation of derelict, deteriorated or redundant properties including listed buildings

Conversion of disused buildings such as barns, chapels, water towers and windmills

Self-build constructed of sustainable building materials and incorporating high levels of energy efficiency

Difficult to sell properties such as non-standard construction (where energy efficiency improvements are to be undertaken), sound properties in deprived neighbourhoods or properties with agricultural restrictions (but only where other features of the project make it acceptable)

Energy efficiency improvements to existing homes such as insulation and condensing boilers, and renewable energy technologies such as solar panels and wind turbines.

As well as:

Affordable housing

Live/work properties

Buy-to-let properties

Houseboat moorings

Organic farms and smallholdings

Small woodlands

Shared ownership

A brief summary for IFAs and mortgage brokers

Features of our mortgages include:

Daily interest

No higher lending charges

Funds released on land (with planning permission) or unimproved property value

Flexible release of funds in stages

Discount payable based on the energy saving and environmental features of the property. Once the discounts are applied, they remain in place for the term of the mortgage

A dedicated broker online portal enabling brokers to submit and track cases 24/7.

Packaging SupportHelping you receive a quicker offer

Here are some points to remember when submitting

mortgage applications.

Bank statements must

• Contain all pages, including cover pages for postal statements

• Be full months for the period requested

• Show the full account number and sort code

• Show the applicant’s address, full name (or initials and surname) and match the application

• Online statements don’t need the full address displayed but must include name, account number and sort code.

Payslips must

• Show the pay date

• Match the name and address (if present) on the application

• Show net pay and gross pay.

Benefit statements must

• Be the latest award statement

• Contain all pages

• Match the name(s) on the application.

Project information must include

• Professional costings

• Planning permission (if applicable)

• Plans (if applicable)

• Evidence of predicted energy rating

• Proof of own funds (if applicable).

Loan type & sizes

Maximum Loan-to-value

Minimum Loan

Maximum Loan

Mortgage terms

Minimum Term

Maximum Term

Age requirements

Minimum Age

Maximum Age

Applicant residency status

EU Member Citizens

Non-EU Member Citizens

• Asspecifiedinthecurrentresidentialmortgageratesandchargesdocument.• LTV based on the lower of the purchase price or valuation.

• Asspecifiedinthecurrentresidentialmortgageratesandchargesdocument.

• Asspecifiedinthecurrentresidentialmortgageratesandchargesdocument.

• 5 years.

• 30years(asspecifiedinthecurrentresidentialmortgageratesandchargesdocument).

• 18 years.

• At least one borrower should normally be no more than 85 years old at the end of the mortgage term for residential mortgages.

• There is no maximum age for standard buy-to-let mortgages.

• Where the term of a mortgage would go beyond an applicant’s intended retirement age, evidence of post retirement income is required to demonstrate that the mortgage will remain affordable in retirement.

• Where the applicant has indicated that their retirement age is beyond state pension age, we will assess whether this is feasible, based on the nature of the role being performed.

• A citizen of an EU member state must be currently resident in the UK with provable residency and a valid passport.

• A non-EU citizen must be currently resident in the UK, have 12 months provable residency and arighttostayintheUKbywayofapermanent‘Righttoreside’OR‘Indefiniteleavetoremain’stamp and a valid passport.

Current residential mortgage rates and charges. www.ecology.co.uk/mortgages/brochures/

Employment

Employed

Self-employed

• Applicants must have been employed in their current job for a minimum of 6 months.

• Employment within a probationary period is not acceptable.

• Income paid in cash is not acceptable.

• Income paid must be paid in sterling and into a UK bank account.

Maternity/Paternity leave:

• Wheretheapplicantiscurrentlyonmaternityleave,theywillbeaskedtoconfirmtheirintention to return to work. Income based on the response (i.e. full-time, part-time) can be takenintoaccountinconsideringtheapplication.Theapplicant(s)mustbeabletoconfirmthat the mortgage will remain affordable during the maternity leave period.

Employment by fixed-term contract or contractors must have:

• Been reviewed at least once.

• At least 3 months to run to renewal.

• Every chance of being renewed.

• Minimumof12months’trackrecordandverificationthatfurthercontractinplace.

Employed by temp agency must have:

• Minimum of 12 months’ track record.

• Verificationthatfurthercontractinplaceforaminimumof3months.

Verification:

• Incomewillbeverifiedinallcasesbythe3mostrecentconsecutivemonthlypayslips.

• A satisfactory employment reference from the applicant’s current employer.

• Three months’ full bank statements, evidencing receipt of salary must be produced in support of each application.

• Rentalincomemustbeverifiedbyreferencetoatenancyagreementplusproofof6months’rental income evidenced on bank statements, supported by accountant or tax assessments.

• Hand written documents will not be accepted.

• Applicants must have been trading for a minimum of 36 months.

• For self-employed and company directors the following are required:

Most recent 3 years’ accounts and SA302 documents.

Profits:

• Stable/increasingnetprofits:incomewillbecalculatedastheaverageofthemostrecentnetprofitfigures.

page 5continued overleaf

Income

The income of company directors will be based on:

• An average of salary and dividend payments in the last 3 years.

• Where applicants own 100% of the shares in the company then 50% of the residual retained profitmayalsobetakenintoaccount.

Verification:

• Anaccountant’sreferencewillberequestedconfirmingthenetearningsforthelast3years.

• AcceptableaccountantqualificationsareACA,ACCA,ACMA,CPFA,FCA,FCCA,FCMAandICAEW.

Income Component Description Evidence

Contractual allowances If part of employment contract e.g. car allowance, guaranteed bonus, home-working or housing allowance, guaranteed overtime, large town allowance.

As above

Commission – regular Average paid over a minimum 6 month period. Last 3 months’ payslips or P60 documents

Contractor / Fixed term contracts

Minimum of 12 months’ track record required.

Verificationthatfurthercontractinplace.

Employer’s reference

SA302 documents also acceptable alternatives

Private pension Annual annuity or drawdown of less than 5% from private pension(s).

Annual pension award document

Regular investment incomee.g. dividend payments

Average paid over a minimum 24 month period. Accountant’s reference or SA302 documents

Regular trust income Average paid over a minimum 12 month period. Accountant’s reference or SA302 documents

Second job Minimum 6 months’ employment. • Employer’s reference supported by (where required):

• Last 3 months’ payslips or P60 documents

Temp agency income Minimum of 12 months’ track record required.

Verificationthatfurthercontractinplaceforaminimumof 3 months.

• Employer’s reference supported by (where required):


General Income Requirements• All applicants must be UK tax payers and resident in the UK. In arriving at eligible income the following may be taken into account:

continued overleaf

Payment shift allowance Minimum of 6 months’ track record required. • Employer’s reference supported by (where required):


Additional Income

Bonus – discretionary (performance related)

50% of the average of the last 2 years. • Employer’s reference supported by (where required):


Court, non-court approvedand CSA child maintenance

Paid for the last 6 months and payable over mortgage term.

Court order award document

Rental income surplus Net amount after mortgage payments and costs are covered.

MustbeverifiedbyformalaccountsorSA302documents from the HMRC.

Accountant’s reference or SA302 documents

Benefits Income

Carer’s Allowance Paid to people aged 16 or over spending at least 35 hours per week caring for someone with substantial caring needs.

Paid over a minimum 12 month period. Subject to underwriter’s discretion.

Benefitawarddocument

Disability Living Allowance(DLA)

For children and adults aged under 65 who need help with personal care due to disability. From April 2013, DLA was replaced by Personal Independence Payment.



Foster Carer’s Allowance Minimum allowance to cover the costs of caring for a child in their home. National minimum rates apply.



Personal IndependencePayment (PIP)

Replaced DLA for people aged 16 to 64 from April 2013. PIP assists with the extra costs caused by long-term ill health or disability.



State Pension State Pension is received when an individual reaches the State Pension Age.

Pension award document

War Widow(er) Pension Payment if wife/husband/civil partner has died as a result of their service in HM Armed Forces during a time of war.



Benefits Additional Income

Attendance Allowance For people aged 65 or over who need help with personal care due to physical or mental disability.



Child Benefit Paid to individuals responsible for a child even if not their parent. If any borrower receives an income of more than£50,000ayearChildBenefitshouldnotbeincludedas part of their income.



Child Tax Credit Paid to individuals responsible for children aged under 16 or under age 20 if enrolled in certain types of education or training. Incorporated into Universal Credit (rolled out on a phased basis).



Constant AttendanceAllowance

Payment if in receipt of Industrial Injuries Disablement Benefitandneeddailycareandattention.



Employment & SupportAllowance

Providesfinancialhelptopeoplewhoareunabletoworkdue to illness or disability. Incorporated into Universal Credit.



page 8

Guardian’s Allowance Payment to those bringing up a child whose parents have died.



Industrial InjuriesDisablement Benefit

Payment to those who are ill or disabled from an accident or disease caused by work.



Pension Credit Incomerelatedbenefit.



Reduced Earnings Allowance

Payment to those who can’t earn as much as they used to because of an accident or disease caused by their work.



Working Tax Credit Payment is based on the number of hours worked and the salary received. Has been incorporated into Universal Credit (on a limited basis). Universal Credit was introduced in April 2013 and combines a number of currentbenefitsintoonemonthlypayment.



page 9continued overleaf

Unacceptable Income Unacceptable income includes:

Zero hour contractsRent allowanceIncome not paid in £ sterlingIrregular overtimeMaintenance1.

Notes1 Unlessverifiedlegaldocumentssuggestavailablethroughoutremaining/proposedmortgageterm

Affordability

Affordability Assessment

Commitments

Mortgage/Tenancy

Expenditure

Regular Significant Outgoings

Impaired credit

Criteria

• The Society bases its lending decision on the applicant’s ability to repay their loan.

Mortgage:

• Full details and proof of payments will be required for all current and previous mortgages, including second charges, held in the last 3 years unless Call Credit information is available.

• For let to buy, when the current mortgage will remain, rental income must cover the whole mortgagerepayment.Inaddition,confirmationwillberequiredfromthecurrentlenderthatthey are in agreement with the tenancy and a copy of the tenancy agreement will be required.

Tenancy:

• Full details will be required for all current and previous tenancies held in the last 12 months.

• A landlord’s reference will be obtained for all applicants who are renting, including confirmationthatpaymentshavebeenmadesatisfactorily.

• Regular commitments in respect of loans, credit cards, hire purchase agreements, mail order, maintenance etc. will be deducted from income as follows:

– Loans, hire purchase, maintenance – Annual payment made. – Credit cards and mail order commitments – 3% of outstanding balance x 12.Where credit card balances are repaid in full each month – the amount should be covered by expenditure items rather than be deducted from income. – Child care costs – will be included in the affordability calculation. – On other encumbered properties any shortfall (i.e. where the rental income is less than 100% of the borrowing commitment) the difference will be treated as a commitment.

Regularsignificantoutgoingssuchasgamblingwillbeconsideredonacase-by-casebasisandat the underwriter’s discretion an acceptable deduction for expenditure will be made. For more extreme cases where the regularity and amounts are excessive in the context of the applicant(s) lifestyle, the application may be declined.

Wheretheapplicant(s)aresignificantlyintheiroverdraftbutoperatingwithintheiragreedfacility, a 3% deduction as a monthly commitment is normally taken. In extreme cases where the overdraft facility is breached, the application may be declined.

The Society will consider applications where there is historic Impaired Credit/CCJ/IVA/Bankruptcy/Debt Management Plan/Debt Relief Order where these were settled.

Applications will not be considered where repossession has previously occurred.

continued overleaf

Deposit

Verification

In addition, the following criteria regarding an applicant’s credit history will be considered:

• Inrespectofproperty/landpurchasesthesourceofthedepositmustbeverifiedbywrittenconfirmation.

• Deposit from a gift from a family member or other third party: evidence will be required from the acting Solicitor.

Credit Status < 80% LTV 80 - 90% LTV > 90% LTV

Mortgage/ Secured Loan

No more than 1 missed payment in the last 2 years

No more than 1 missed payment in the last 3 years

No missed payments in the last 3 years

Unsecured LoanNo more than 1 missed payment in

the last 2 yearsNo more than 1 missed

payment in the last 3 yearsNo missed payments

in the last 3 years

Credit Card/Store Card/Mail

Order

No more than 2 consecutive missed payments in the last 2 years

No more than 2 consecutive missed payments in the last

3 years

No more than 1 missed payment in the last

3 years

CCJ/Sheriff Court Decrees

None registered in last 3 yearsCCJs registered more than 3 years

agobutonlysatisfiedinlast2yearsacceptable if total balance does not

exceed £750 and maximum of 2

None registered in last 5 yearsCCJs registered more than 5

yearsagobutonlysatisfiedinlast 4 years acceptable if total balance does not exceed £500

and maximum of 2

Not normallyconsidered

DefaultTotal must not exceed £500 and

musthavebeensatisfiedformorethan 2 years

Total must not exceed £500 and musthavebeensatisfiedfor

more than 3 years

Total must not exceed £250 and must have

beensatisfiedformorethan 3 years

Debt Relief Order/Debt

Management Plan

Cleared for at least 2 years as long as effected over 3 years and less than

£10,000 in total

Cleared for at least 3 years as long as effected over 4 years and less than £10,000 in total

Cleared for at least 3 years as long as

effected over 4 years and less than £5,000

in total

Bankruptcy/IVA Satisfiedfor6years Satisfiedfor6yearsNot normally

considered

Payday Loans None in the last 18 months None in the last 2 years None in the last 3 years

Repossessions Not acceptable Not acceptable Not acceptable

Repayment strategy

Capital & Interest

Interest Only

Part and Part

Security

Property Types

• Permitted.

• Permittedonspecificproducts–refertothecurrentresidentialmortgageratesandchargesdocument.

Repayment strategy:

Must be held in the UK in Sterling.

Endowment policy• Projection from the provider based on current value and contribution levels.• Term must coincide with or mature before expiry of the mortgage term.

Commutable sum from pension• Projected tax-free cash value.• Term must coincide with or mature before expiry of the mortgage term.

ISA• Value of existing savings/investment vehicles, including projected value where further regular

contributions will be made.

Sale of property• SaleofotherUKpropertywherethereisevidencethenetvalueoftheassetissufficientto

repay the mortgage.

• Permittedonspecificproducts–refertoproductguide.

Acceptable security types:

• Houses:

• Detached/semi-detached/terraced/townhouse/bungalow• Shared ownership• Flat roof properties• Properties with agricultural ties• Flying freehold• Timber construction• Ex council properties• Earth shelters• Turf roofs• Modern Methods of Construction (MMC)

continued overleaf

Unnaceptable Security

Unacceptable Defective Properties

Mortgage Types

Purchase of Existing Properties

Re-mortgage

Self-build

Debt Consolidation

• Flats:

• Maximum 4 storeys• Shared ownership• Leasehold with remaining term on the lease of at least 35 years at the end of the mortgage term• Flats above occupied shops and commercial premises (with due regard to the nature of the

activity in such premises).

The following types of property are not acceptable:

• Freeholdflats• Holiday/second homes• Mobile homes• Park homes• Bedsits• Houseboats• Properties which are affected by Japanese Knotweed• HMO properties

• Permitted (provided that the property complies with the Society’s ecological requirements).• Provided that building insurance can be obtained.

• Acceptable if the property complies with the Society’s ecological requirements.

• Permitted (provided that the property complies with the Society’s ecological requirements).• Provided that building insurance can be obtained.• Outline planning permission required as a minimum.• Full plans and professional build costs required.• Eligible for our C-Change discounts (see page 11).• Available on repayment or interest-only (see our repayment strategy criteria).

The Society will only provide debt consolidation for secured mortgage debt or repayment of family loans.

• Airey• Boot• Boswell• Butterley• Cornish Type 1• Cornish Type 2• Dorran• Dyke• Gregory• Hawksley• Laing Easiform

• Myton• Newland• Orlit• Parkinson Frame• PRC Limited• Reema Hollow Panel• Schindler• Smith• Stent• Stonecrete• Tee Beam

• Tarran• Underdown• Unity• Waller• Wates• Wessex• Whitson Fairhurst• Wimpey No Fines• Winget• Woolaway

Renovation

Conversion

Shared Ownership

Buy-to-let

• Permitted (provided that the property complies with the Society’s ecological requirements).• Provided that building insurance can be obtained.• Planning permission required where applicable.• Full plans and professional build costs required.• Eligible for our C-Change discounts (see page 11).• Available on repayment or interest-only (see our repayment strategy criteria).

• Permitted (provided that the property complies with the Society’s ecological requirements).• Provided that building insurance can be obtained.• Outline planning permission required as a minimum.• Full plans and professional build costs required.• Eligible for our C-Change discounts (see page 11).• Available on repayment or interest-only (see our repayment strategy criteria).

• Permitted (provided that the property has a minimum Energy Performance Rating of ‘B’).• Minimum purchase share is 25%.• The maximum LTV ratio considered by the Society is 95% of the share being purchased.• Eligible for our C-Change discounts (see page 11).• Available on a repayment basis only.

• Permitted (provided that the property complies with the Society’s ecological requirements).• A maximum portfolio of no more than 3 properties (including the property being mortgaged

with the Society).• Rental income must exceed the mortgage payment by 135%.• Maximum term 25 years.• Available on repayment or interest-only basis.

C-Change discounts

Type of discount

C-Change sustainable homes

C-Changeretrofit

C-Change energy improvements

Interest rate reduction (applied from SVR)

0.50% - 1.25%

0.25% - 1.50%

1.00%

Applicable to

The whole of the mortgage balance outstanding. The higher the energy rating, the higher the discount.

The whole of the mortgage balance outstanding. The size of the discount will depend on the number of grade improvements achieved within the Energy Performance Certificate(EPC).0.25%discount for each EPC grade improvement.

Funds being used to install energy savings measures or renewable energy systems.

When applicable

At completion, if confirmationofenergyrating is available. Otherwise, as soon as confirmationofenergyrating is achieved.

Once works are complete and a new EPC verifying the upgrade is received.

Once works are complete and invoices are provided for qualifying works.

Project suitability

Self-buildConversionShared Ownership

Renovation

Renovation

Our C-Change discounts are a unique way for your client to save money on their mortgage. The discounts are available on mortgages for selfbuilds,existingenergyefficienthomes,renovationsandconversions.

The following table outlines the three types of discount available under our C-Change scheme. For further details, please visit ecology.co.uk/mortgages/c-change-discounts.

June

202

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T 01535 650 770W ecology.co.ukE [email protected]

EcologyBS

@EcologyBS

Ecology Building Society 7 Belton RoadSilsdenKeighleyWest YorkshireBD20 0EE

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Community and commercial mortgages offered by Ecology Building Society are not regulated by the Financial Conduct Authority.

Financial Services Register No. 162090

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Lending Criteria Guidelines - Ecology Building Society · 2020. 7. 1. · • Income paid must be...

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